2 year Inn owner Transition Plan-Feedback?

24 replies [Last post]
Offline
Joined:
02/11/2015

Great site and appreciate all the wonderful knowledge on the site.  Look forward to any information you can give!

We are just in the business planning stage, but want to be very thorough in my personal plan. My apologies if these questions were answered in another forum I have not come across, I continue to read through as many posts as I can.

My wife and I are putting together a 2 year plan to open an Inn about an hour or so away outside of our city.  We are looking for an small tavern with a small kitchen to turn into an inn.  We have actually come across quite a few real estate properties where this makes sense.  We do not have the capital to purchase a fully functioning inn, so we need to build from the property up with no books.  We have about $50k plus a nice 25% down payment on a $300k-$400k property (yes we are finding properties in that range).  We plan to continue to work through most of the renovations and budget about a year of mortgage payments after renovations are done and we are building the business. She will continue to work.  Our plan would be to get the inn up and running first using the tavern as B&B; move to dinners, then ultimately open as a full tavern. 

 

 

My questions for you on how you would approach this transition:

We currently do well in showing our income (Over $200k/year).  Would our best bet be to purchase as an investment residential property while we have the dual income rather than try for a business loan? I understand how hard small business loans are to get, and I am seeing on here it isn't any easier for a B&B. 

I have concerns $50k just not enough?  Keep in mind we will still have an income, so that $50k would be for renovations and upstart, not living.  Also keep in mind this would be a smaller inn.

I have a basic understanding of the zoning, coding, and licensing overall, but what is the coding like for B&B kitchens?  Where is the cutoff between cooking for guests (breakfast and dinner) and outside guests? Has anyone started with breakfast and gradually moved to open up the restaurant?

Would you prioritize inn, then worry about restaurant?  Is there a target income you should look at for inn to restaurant income? 

Also, the real estate teams that focus on B&B's.  I see these are "listing" agents, but don't see any buying agents.  Do they change anything additional over their 3% commission to help in the process?  Are there B&B brokers that will help in a residential situation.

 

Many thanks all responses appreciated!

Offline
Joined:
02/11/2015

Great stuff! I guess you can plan and plan and plan but ultimately you need to be flexible to make it work! I had the red flag up for codes, but Completely forgot about sprinklers within that! 

So what can you do during the process to CYA? I guess put the zoning contingencies into the sales contract? Obviously that is not the most attractive offer but after hearing most debate for years til the right opportunity comes along, if it's not meant to be move on. Can you get license while going through the purchase process?

yes, I'm looking for a commercial kitchen, something similar to 40 Putney, but on a much smaller scale. But the pub similar; not $2 pitchers for the locals, but a nice atmosphere for the guests to relax unwind and have a nice bottle of wine or beer and some high quality pub type food. I'd like to keep it fairly small...20 seats or so. 

The places I am looking at have commercial kitchens and where once some type of restaurant, they are in smaller township commercial zones. So if the zoning is commercial is there still a chance to come across boarding issues making a inn? I should be good right, just have to be at the mercy of the codes for inns?

Great to hear, like anything te arsing in life, you definitely have to WANT it! 

Offline
Joined:
06/24/2008

Katieandmarcusm wrote:

So what can you do during the process to CYA? I guess put the zoning contingencies into the sales contract? Obviously that is not the most attractive offer but after hearing most debate for years til the right opportunity comes along, if it's not meant to be move on. Can you get license while going through the purchase process?

Yes you can make offers with the contingency of getting a permit to proceed.  Sometimes the process is not a simple one though and could take time to be approved, that may hinder the seller to accept your offer.  

As others have stated the best action would be to gather your facts from the area's zoning office.  If you are looking in different counties, check with each office as the process may be different from one to another.  

I see by other posts you are looking at properties that already have a commercial kitchen - good move as you would drain all of your renovation $ on that kitchen alone.  

Good luck to you.   

gillumhouse's picture
Offline
Joined:
05/22/2008

Katieandmarcusm wrote:

Great stuff! I guess you can plan and plan and plan but ultimately you need to be flexible to make it work! I had the red flag up for codes, but Completely forgot about sprinklers within that! 

So what can you do during the process to CYA? I guess put the zoning contingencies into the sales contract? Obviously that is not the most attractive offer but after hearing most debate for years til the right opportunity comes along, if it's not meant to be move on. Can you get license while going through the purchase process?

yes, I'm looking for a commercial kitchen, something similar to 40 Putney, but on a much smaller scale. But the pub similar; not $2 pitchers for the locals, but a nice atmosphere for the guests to relax unwind and have a nice bottle of wine or beer and some high quality pub type food. I'd like to keep it fairly small...20 seats or so. 

The places I am looking at have commercial kitchens and where once some type of restaurant, they are in smaller township commercial zones. So if the zoning is commercial is there still a chance to come across boarding issues making a inn? I should be good right, just have to be at the mercy of the codes for inns?

Great to hear, like anything te arsing in life, you definitely have to WANT it! 

Unless in previous life the restaurant was also a lodging, also check building codes. IF there is a change of usage, previous building codes may not count. We had an insurance office space converted to retail with apartments upstairs.(apts already there before retail) and because of usage change, new codes kicked in. It was nothing drastic in this case, but it could possibly be in yours. 2-hour fire retardant drywall in ceiling and some other stuff - but the owner of the building had a cow.

You can go to all the pertinent code offices (zoning, building, fire, health) BEFORE you purchase and get it in writing IF & what. No in any department means you look elsewhere. Do not "count" on getting a variance. Most times it ain't gonna happen.

Morticia's picture
Offline
Joined:
05/22/2008

Are you looking in the same area as 40 Putney? ie - new England?

There's a place in Maine to look at that has a similar set up. Commercial kitchen, established inn, but potential for improvement.

Won't work if you have jobs elsewhere.

__________________

What a long, strange trip it’s been.

 

Offline
Joined:
02/11/2015

Actually I think I know of the inn you speak off, up around Sabego lake. great inn, great opportunity, great concept, very fair price, not the best location...

Morticia's picture
Offline
Joined:
05/22/2008

Cornish.

Phippsburg.

Rome.

Brooklin. (I've been to this one. Interesting layout. Great views.)

There are inns with restaurants for sale in all of those towns. If nothing else, you get an idea of what's out there. Not that you want to look in Maine, it's just that we looked at the one in Cornish and wished we had the gumption to go for it.

seashanty's picture
Offline
Joined:
06/02/2008

 please really try to get a b&b with licensing in place - you can always upgrade and renovate - if you love the location.

i renovated a place that had a recent license but was 'a dump'  ... not anymore!  you CAN do it. and you should see that place now.  the most recent owner has deep pockets and has made it shine.

zoning can destroy all your plans.  promises and okays from some officials won't mean you won't get denied when it comes to getting the zoning changes approved.  most neighbors don't want more traffic - more people - a business - in their neighborhoods. all it takes is one loud voice to convince others that it would be a bad idea.

 i personally know of one person who has invested almost $50,000 just in trying to get her location as a business approved on top of the purchase price,  only to be denied as a b&b. she has appealed and been turned down.  she submitted plan after plan, met with three architects and hired a lawyer to help, paid for some kind of traffic and noise study, has all these photos showing how the neighbors' property is some distance away and out of site  ...

endless and heartbreaking as the realtor 'thought it would be no problem.'  neighbors were supposedly on board, local building inspector thought it would be lovely.  etc. sad

she's currently trying to sell the residence as it was not her intention to live in a big beautiful house, her dream is the b&b.  

Offline
Joined:
04/21/2013

I am in the process of renovating and $50k is not enough. We are doing mostly cosmetic stuff and mostly ourselves (my husband happens to be very handy) but it is still expensive, and there are some bigger issues that were not immediately apparent, like the giant water leak that started a few weeks after purchase. We are also required to put hardwired smoke detectors in and *if* we opened a restaurant we would have to put a sprinkler system in the entire house (it is not required if the restaurant is freestanding but is required if there is any other business going on in the building). We don't have a Victorian, but our house is still over 80 years old and, while it did have water leaking from the ceiling, putting in an actual sprinkler system would be a major expense.

As far as making money on a restaurant, food cost typically runs 35-40%, labor might be 30-35% and overhead is usually around 30%. Which leaves, oh, basically nothing for profit. Of course, your overhead might be lower if you lean on the inn side for the mortgage and your food cost and labor can both be brought down depending on your menu and style. My background is in restaurants and while I would love to do one at our inn, it would be way to cost prohibitive for us. If you can find a place that already had a commercial kitchen that is up to code, you have knocked out most of that initial expense.

happykeeper's picture
Offline
Joined:
12/11/2008

We have used the old adage about restaurants on here enough that you will find most agree that it can be more of a drag and a loser when you factor it all in.

That said, we have found that redesignating ourselves so that we have a commercial kitchen and have permission to serve dinner has had a huge impact on attracting our perfect guest. It has set us apart from the crowd and given us a niche all to ourselves. We have used it where it can work and restricted it to stay balanced. 

__________________

Take a leap.... and a net will appear

 

Offline
Joined:
02/11/2015

happykeeper wrote:

We have used the old adage about restaurants on here enough that you will find most agree that it can be more of a drag and a loser when you factor it all in.

That said, we have found that redesignating ourselves so that we have a commercial kitchen and have permission to serve dinner has had a huge impact on attracting our perfect guest. It has set us apart from the crowd and given us a niche all to ourselves. We have used it where it can work and restricted it to stay balanced. 

good point; this is how I am looking at the food/beverage side going into it; as more of a cost to doing business to differentiate rather than a profit center. 

Can you elaborate a little more using it to "work and restricted it to stay balanced"? How have you done that? Limited days? Limited meals? Just in packages? Keeping it small? Limited employees? 

happykeeper's picture
Offline
Joined:
12/11/2008

We have been working for a long time to become a destination. That means good locally sourced food. We tried a few things out and ended up with

Friday as our (very popular) pizza night. Homemade crust, homemade sauce, locally sourced salad. 

Saturday as 3 course dinner

Sunday through Thursday (our choice) either our meat, cheese, and fruit platter or our main plate (entree, veg, starch)

Food in the evening has been a great revenue boost without taxing our labor or fixed costs. We limit hours and we limit our time in the kitchen. Guests get some great food. Still leaves time for a chat on the lanai. Everyone goes to bed happy. 

A restaurant is a whole different animal. You can't control who will show up during your hours of operation, etc. Money pit

 

gillumhouse's picture
Offline
Joined:
05/22/2008

happykeeper wrote:

We have been working for a long time to become a destination. That means good locally sourced food. We tried a few things out and ended up with

Friday as our (very popular) pizza night. Homemade crust, homemade sauce, locally sourced salad. 

Saturday as 3 course dinner

Sunday through Thursday (our choice) either our meat, cheese, and fruit platter or our main plate (entree, veg, starch)

Food in the evening has been a great revenue boost without taxing our labor or fixed costs. We limit hours and we limit our time in the kitchen. Guests get some great food. Still leaves time for a chat on the lanai. Everyone goes to bed happy. 

A restaurant is a whole different animal. You can't control who will show up during your hours of operation, etc. Money pit

 

A few years ago I was asked to come in as a consultant for a proposed B & B. I asked, where is the kitchen? He akso owned the Hampton across the parking lot and his plan was to hot cart breakfast over to the B & B. Hmmmm, not iking that, I then asked - where is the dining room? After 3 years of 2 men renovating this house these two thing were missing. So I said, OK, let's go see what you have at the Hampton.

They had a space on the ground floor that was as of then totally unfinished. I suggested they could open that for breakfast ONLY to the B & B guests as they did not want to have it open all the time. I also suggested they could have the breakfast cooks be prep for dinners. There would be limited seating, premium pricing to make it a place people wanted to go to, suggested posting a menu with 2 or 3 choices by the month as reservation only which would limit waste with food and staff costs as they would know in advance how many. They could also offer it as a package to the hotel guests stating dinner is at ____ time. If you are not here for dinner, oh well as it is paid for. IF they did it or not, I do not know. It is in a different State and I never went back to see.

Mac
Offline
Joined:
12/03/2014

My first thought is wondering what the draw is for out-of-town people in the area you are looking at? A university? A theme park? State park? A b&b or inn both need a reason for out-of-town people to come to your area, no matter how wonderful the building is.

__________________

Mac and Me

 

Innkeep's picture
Offline
Joined:
06/04/2008

40 Putney Road in Vermont has a tavern and a B&B.  You might check out their website to see if that's what you had in mind. 

Converting a residence into a B&B is more expensive than you can imagine.  For instance, zoning is by far the first and most important thing to do first.  However after you get the zoning, at least in my state, all construction needs to be done using commercial building codes.  And those codes aren't posted anywhere for free.  You have to buy at great expense or get a contractor who you trust to interpret what those commercial codes really mean.  And your contractor might interpret them one way and the building inspecter another way.  (This is not the case for all states, but you must get it in writing from a local building inspector or attorney)

What constitutes a B&B kitchen varies from county to county.  Might be better off to build your commercial (restaurant) kitchen from the start because probably less expensive than going back to retro-fit.  But that would involve a considerable outlay of funds.

I have also heard from innkeepers that the B&B made more money than the restaurant, so you should not skimp on the accommodations.  Sometimes you feel "stuck" with a floor plan that doesn't allow much room for a bathroom, and nice bathrooms might attract guests willing to pay a premium for steam showers or double jetted tubs.  I suspect getting a residential loan would be easier than a commercial loan, but you must understand the zoning of your property before you buy it.  A few of our Innmates have built new buildings so they can get exactly what they want.  Want balconies, private entrances, large bathrooms?  Can be done, but usually is a slow process.  Build as funds become available by continuing to work.

I'm not sure you have enough money yet.  Before you open and after you have added all the bathrooms you need, you still need to spend more. You'll need a website.  It should look professional.  Even though it is easier to do web design now, unless you're good at it, that, and photographs, need to look professional.  This is where someone who really knows what B&B websites should look like can be very valuable for you.  That might be done for less than 1k, but don't bet on it.  You'll find online property management software or booking software will also be needed.  There's a search function at the top right of each page, so you can read up on all the resources you might end up spending money for internet services, business listings, etc before you even open.

Furnishing each guest room can be done creatively from antique malls and thrift shops, but you still need quality mattresses, bedding and linens, televisions (probably), draperies, flatware, plates, etc etc.  You also need B&B insurance, usually more expensive than residential.

I think I've helped you spend half of your 50k reserve before you've remodeled your first bedroom.

OnTheShore's picture
Offline
Joined:
08/28/2011

I say if you want to (eventually) go big, then you need to plan big from the start. That doesn't mean that you have to start out with the whole thing all at once, you can build up to it over time, but you need to have the "final" end point for your business in mind as you go forward.  You have to make sure that your zoning and other permits all will allow your end point. If your end game is a tavern, it does no good to start in the permitting process by only putting forward the B&B application; you need to make sure you don't get closed out of being able to do what you ultimately want to do.

Similarly, in terms of renovation planning, you don't want to spend a bunch of money to renovate to starting point A, and then have to spend a bunch more to re-renovate to get to point B. If you know you have point B as your end goal, plan for that in your approach to renovations (e.g. make sure you have the room, utilities, and infrastructure in place for a full commercial kitchen even if you are not going to build such a kitchen right from the get-go).

I think I am saying the same thing as what's already been said...

__________________

"where even time relaxes...."

 

happykeeper's picture
Offline
Joined:
12/11/2008

Harborfields wrote:

I say if you want to (eventually) go big, then you need to plan big from the start. That doesn't mean that you have to start out with the whole thing all at once, you can build up to it over time, but you need to have the "final" end point for your business in mind as you go forward.  You have to make sure that your zoning and other permits all will allow your end point. If your end game is a tavern, it does no good to start in the permitting process by only putting forward the B&B application; you need to make sure you don't get closed out of being able to do what you ultimately want to do.

Similarly, in terms of renovation planning, you don't want to spend a bunch of money to renovate to starting point A, and then have to spend a bunch more to re-renovate to get to point B. If you know you have point B as your end goal, plan for that in your approach to renovations (e.g. make sure you have the room, utilities, and infrastructure in place for a full commercial kitchen even if you are not going to build such a kitchen right from the get-go).

I think I am saying the same thing as what's already been said...

I think you said what I wanted to say but much better

Offline
Joined:
05/22/2008

Yes I have a perfect example. Couple wants to open an upscale restaurant. Buy the building renovate up the whazoo and guess what it sits empty because there is NO kitchen! WT????

Who starts a business/ restaurant without doing a kitchen first?  Now they don't have money and can't get a loan. Didn't even have a business plan to take to a banker?  DUMB!

Offline
Joined:
05/30/2008

Who starts a biz without the proper zoning being in place?  We are fighting a zoning change now...

__________________

People don't notice whether it's winter or summer when they're happy.
~ Anton Chekhov

 

gillumhouse's picture
Offline
Joined:
05/22/2008

It depends on your location as to: do you have to have a commercial kitchen for B & B (in which case you may as well be a restaurant also); as a B & B can you serve your cooked food or pre-packaged only; get all answers IN WRITING from ANY bureaucrat.  Think hard about the labor involved with B & B AND restaurant and the availability of staff. Either or will wear one out - both will kill if trying to do it alone.

Offline
Joined:
02/11/2015

Great feedback...

Definitely know we won't make that after making the jump...thinking more along the lines of break even after 3 years! Smiling

 

We want an inn that has food and beverage...in no way ONLY Restaurant.  Inn first, but tavern within (properties already have the space/Kitchen).  Guess my specific question was should we go B&B route, then convert to Inn, or go straight to inn. We would like to plan to focus on rooms first, offer food and beverage, then conservatively make the jump toward offering more hours of meals/tavern/etc.  We want  income to be mainly generated by the rooms, but have food and beverage... I wanted to start off with breakfast (and not dealing with inspections, etc.) then move toward the direction of dinners, evening drinks, etc. 

I guess that would boil down to local zoning?

 

Morticia's picture
Offline
Joined:
05/22/2008

Absolutely start with zoning. If you are converting a residential property into a business you need it all in writing. Depending on where you are you may run into neighbors who don't want a 'tavern' (read: BAR) in their neighborhood.

Ditto not wanting an 'inn' (read: flophouse or Potty Mouth (auto filter)house). Seriously. You have to read some of the zoning problems people have had.

So, yes take a class from your state innkeeper's association and ask the questions there. Also go to the town where you want to open and sit down with codes enforcement folks and get it all in writing.

Offline
Joined:
05/22/2008

In most locals, breakfast at B & B is only for inn guests. Not outsiders. You should check local zoning before you go any further with your plans. You will be dealing with inspections for just about any thing when food is concerned. Though I guess one or two room places are exempt in some states.

Every innkeeper with combo place I know has told me that they only way they made money is 'heads in the bed" and that restaurant was more pain than it brought in.

happykeeper's picture
Offline
Joined:
12/11/2008

Katieandmarcusm wrote:

Great site and appreciate all the wonderful knowledge on the site.  Look forward to any information you can give!

We are just in the business planning stage, but want to be very thorough in my personal plan. My apologies if these questions were answered in another forum I have not come across, I continue to read through as many posts as I can.

My wife and I are putting together a 2 year plan to open an Inn about an hour or so away outside of our city.  We are looking for an small tavern with a small kitchen to turn into an inn.  We have actually come across quite a few real estate properties where this makes sense.  We do not have the capital to purchase a fully functioning inn, so we need to build from the property up with no books.  We have about $50k plus a nice 25% down payment on a $300k-$400k property (yes we are finding properties in that range).  We plan to continue to work through most of the renovations and budget about a year of mortgage payments after renovations are done and we are building the business. She will continue to work.  Our plan would be to get the inn up and running first using the tavern as B&B; move to dinners, then ultimately open as a full tavern. 

 

 

My questions for you on how you would approach this transition:

We currently do well in showing our income (Over $200k/year).  Would our best bet be to purchase as an investment residential property while we have the dual income rather than try for a business loan? I understand how hard small business loans are to get, and I am seeing on here it isn't any easier for a B&B. 

If there is any way to get your capital up front with residential rates, take the max you can afford, set some aside for savings, and use the rest for your upgrades. Once you are in business, you will not see those low rates again. 

Katieandmarcusm wrote:

I have concerns $50k just not enough?  Keep in mind we will still have an income, so that $50k would be for renovations and upstart, not living.  Also keep in mind this would be a smaller inn.

Hard to say- depends on what you want to do. We played it conservatively and that has meant less stress, but it has also meant building our business slowly at a pace we can afford. 

Katieandmarcusm wrote:

I have a basic understanding of the zoning, coding, and licensing overall, but what is the coding like for B&B kitchens?  Where is the cutoff between cooking for guests (breakfast and dinner) and outside guests? Has anyone started with breakfast and gradually moved to open up the restaurant?

We had to go back to the county to alter our permit in order to move forward. It might have been better to ask for everything we wanted the first time. It did work out, but you don't want to spend money on something that will have to be replaced when you step up to the next phase of your plan. We started with a bed and breakfast and moved to an inn, within the confines of special permitting. Serving to the public like a restaurant would take us out of that process and throw us into zoning changes, which are MUCH more difficult. If you are finding something that already allows your final use, that will make it much easier when the time comes. 

Katieandmarcusm wrote:

Also, the real estate teams that focus on B&B's.  I see these are "listing" agents, but don't see any buying agents.  Do they change anything additional over their 3% commission to help in the process?  Are there B&B brokers that will help in a residential situation.

If real estate brokers are anything like travel agents these days, it's all about what's easiest. The client rarely gets the benefit of agents that actually care about finding what you really want. They just want the sale. 

 

Offline
Joined:
10/07/2008

Good questions!

First off a restaurant and a B&B are two different things. Don't expect to open to the public without being a fully operation restaurant, and all that entails. Are there any doing this now in THAT locale? If so, I would ask the health dept and local licensing agency, town, county or whatever it is there. 

Second question, B&B Brokers are for YOU also the buyer, not for the seller per se, of course they will do both and do both, all of them, they want the $.  They will convince you to not buy a lifestyle B&B. 

From my own personal experience to the dread of any B&B broker who is on this forum, as they are from time to time is they aren't worth what you pay for them, you can do everything else and save that %. Many list with them because they are told (by the brokers) that they will bring qualified buyers your way and take care of everything. This is not the case. 

Financing is iffy. No matter what you make right now, that is not what you will make when you turn red coat from your profession and take on an entirely new ones (even with one person holding down the same job, as they can't guarantee she will do that, right? You may say that then she quits).

Back to the tavern idea, are you wanting to be a restaurant or an inn? Are you settling for one over the other or are you interested in achieving both? One innkeeper I know had to basically rebuild the entire historic structure to make it into a prix fixe menu restaurant, and ended up building a totally separate building to meet the building/health and safety requirements. The inn has since closed as well...so be careful not to cast a super wide net. Of course the wider the net the more money it takes.

I would recommend an aspiring innkeeper conference if you can get to one that answers all of these questions, not trying to pass the buck, it is just there are many questions within your one post. 

ALL THE BEST!

My answers are not to discourage you, but to help clarify...we all need road maps to get from A to B and innkeeping never provides such a thing, as the answer is always:  D) It depends.

__________________

Gluten free is never free. - Joey Bloggs

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.